Perceptions by law departments of law firms’ obstacles to AFAs; gaps between rankings

Respondents to last year’s ALM metrics survey ranked seven possible internal obstacles for law firms to fully implementing alternative pricing strategies. The leading reason was “Law firms are more comfortable with the billable hour” (2.2 average ranking where 1 is most important). Next was “Absent better metrics and data, it is difficult to determine alternative values” (2.9), followed by “Firms have insufficient experience defining or managing work on an alternative basis” (3). After that, “There is not sufficient billing history or pricing methodology to know how to bill AFAs” (3.6), followed by “Other” (4) and “Alternative fee arrangements are too risky for the firm’s overall revenue” (4.3) and “Partners object or refuse to cooperate” (6).

The gaps in the average ratings highlight how dominant the respondents thought the first reason was. The gap to the next reason is 33% of the lowest score. “Absent metrics” and “insufficient experience” are in a virtual dead heat (2.9 and 3) so they are perceived to be equivalent blocks. Then a 20% gap between the third ranked reason and the fourth (“insufficient billing history”), which is close to the fifth (“Other” at 4). Partners’ objections were off the chart low. Rankings tell us something; gaps between ranks adds to our understanding.